Bank Nifty may rally to crucial resistance levels

The banking sector index, Bank Nifty had formed Adam and Adam double top pattern and had given breakdown of the neckline on July 19, 2019 and thereafter witnessed further correction. The correction halted near 100-week EMA level, where it had formed Dragonfly Doji candle.

In the current week, the Bank nifty gained 850.85 points or 3.12 per cent and formed closing bullish Marubozu like candle. This bullish candle has no shadow extending from the close price end of the body. Closing Bullish Marubozu candle indicates extreme bullishness. The emergence of the candle has raised expectations that the sudden change in market sentiment will be carried forward over the next few trading sessions. Hence, traders should look for buying opportunity.

Among the constituents of Bank Nifty, ICICI Bank and Kotak Mahindra Bank were the top gainers, while on the flip side, IDFC First Bank and Bank of Baroda were the top losers on Friday.

Going ahead, there are several resistances in the 28450-28560 zone. The initial resistance is 50-day EMA which is currently placed at 28466 and 200-day EMA which is currently placed at 28536 level. The 38.2 Fibonacci retracement level of May 31 to August 23 fall is placed at 28555.80 level. In case, Bank Nifty succeeds to rise above all these resistances, it will strengthen further. Any sustainable move above the level of Rs 28560 is likely to open up gates for further rally towards the levels of 29000, followed by 29500. From the momentum indicators perspective, the 14-period weekly RSI has taken support at 35 levels historically many times and this time also it has bounced exactly from the same level. The weekly stochastic oscillator is also suggesting some bullish momentum as %K is above the %D.

Derivatives data suggests that among Bank Nifty Calls, 28,000 strike price of the September 19, 2019 weekly expiry is the most active Call. Whereas, among Bank Nifty Puts, 27,500 strike price of the September 19, 2019 weekly expiry is the most active Put. For the September 19, 2019 weekly series, the maximum open interest (OI) outstanding for Calls were at 28,500 strike price and that for Puts were at 27,500 strike price.